10:25 am
BKX, our liquidity proxy, made its reversal from the upper trendline of its 10-month trading channel yesterday while completing its extended Master Cycle. A sell signal awaits it beneath its Cycle Top support at 119.22. The Cycles Model suggests a decline may be in order until late November. Note the Head & Shoulders neckline near 73.00. While the major banks appear to be basking in their good fortune to be profiting from the markets, the regional banks are pulling back due to increased loan losses and lagging interest income.
ZeroHedge remarks, “94-year-old Warren Buffett’s Berkshire Hathaway offloaded even more Bank of America shares this week to sustain <10% regulatory threshold, a move triggered by the bank’s own share buybacks, which pushed Berkshire’s stake back above the 10% mark. Buffett’s strategy is clear: keep the stake below this threshold to avoid constant SEC reporting that results with every sale.
Bloomberg data shows Berkshire’s total proceeds from selling BofA shares topped $370 million this week. The selling abruptly began in mid-July.”
8:45 am 2 Chronicles 7:14
“If my people, which are called by my name, shall humble themselves, and pray, and seek face, and turn from their wicked ways; then will I hear from heaven, and will forgive their sins, and will heal their land.”
Good Morning!
SPX futures rose to 5859.00 this morning. Chances are better than even of a new all-time high this morning. Should the previous high be broken, there are indications of a rise to 5924.00 in a blow-off. In the event of a reversal, an aggressive sell signal may be found beneath 5800.00.
Today’s options chain (pm) shows Max Pain at 5840.00. Long gamma begins at 5850.00 while short gamma may start beneath 5800.00.
ZeroHedge reports, “US equity futures are higher with tech leading once again, thanks to results from Netflix which beat lofty expectations and sent its stock to all time highs. As of 8:00am, S&P futures were up 0.2% to 5,900 while Nasdaq futures gained 0.5%, with most MegaCap Tech named higher: NVDA +1.2%, AAPL +1.1%, and NFLX jumped 6% post earnings beat. Bond yields are mixed and USD is lower; 2-, 5-, 10-year yields are 0.45bp lower, 0.23bp higher, and 0.6bp higher, respectively. Commodities are mixed with oil higher, base metals lower, and precious metals higher after China macro data beat estimates but reaffirmed the downward trend of China’s economy. Today, the key macro focus will be housing data (Housing Start and Building Permit), as well as AXP and PG earnings.”
VIX futures consolidated this morning, awaiting the outcome of options expiration. It may have made its Master Cycle low yesterday at 18.88 on day 248. The Cycles Model indicates a surge in trending strength starting next week, so today may be the last day to attempt a lower low.
The October 23 options chain shows Max Pain at 18.00. There is no appreciable short gamma. Long gamma is also in short supply with a possible long gamma starting at 20.00 and fizzling out above 28.00. It is this type of scenario that catches the most investors off guard.
The Shanghai Composite Index rose to 3152.82 today in a retracement bounce that may reach the 50% retracement level near 3400.00 early next week. The Cycles now give the Shanghai to early December to reach the Cycle Bottom. Investors, on the other hand, have turned bullish after a 50% decline from the spike top. The China trade has become crowded with longs hoping for a repeat of the earlier rally.
ZeroHedge comments, “On the day the Biden admin decided to flagrantly misrepresent the last retail sales report before the election, and used the biggest ever September seasonal adjustment on record to make an unadjusted retail sales decline into a blazing hot print, once again misleading the Fed that the economy is doing much better than it is, something Powell lamented after the BLS recently “revised out” some 818K jobs …
… China decided to out BS the BLS, and moments ago reported economic “data” that was fake, goalseeked and, well, BS from top to bottom.”
TNX futures rose to 41.23 this morning prior to the cash open. It is currently resting on trendline support at 40.70. Should it break lower, it may briefly decline to 40.00 to complete the Master Cycle. However, the long term trend is to go higher through the end of the year.
The Japanese Yen futures rose to 67.07 this morning after extending its Master Cycle low to 66.52 yesterday. Hedge funds and institutions have been piling back into the Yen carry trade, as interest rates from the Bank of Japan are still .10%. The Yen is due to reach the Cycle Top by the end of the month.
Gold futures made another all-time high at 2732.10 today at 2732.10. It may attempt to reach its Cycle Top at 2737.68 yet before making its Master Cycle reversal. Ahead of it is a month-long decline that may reach the Cycle Bottom at 1988.89. Gold’s inverse correlation to the USD has taken a hit recently.
USD futures have pulled back from its mid-Cycle resistance at 103.66 this morning. It may consolidate for as long as two weeks to digest the overbought condition. However, the rally may continue through mid-November once the retracement is over.